Credit Network

Definition

A Credit Network denotes the mathematical representation of the actual credit relationships within an economy. The purpose of such models is the analysis of the performance of such networks, Risk Management

While the mathematical concepts underpinning a credit network can be specified in continuous time (and obviously any economy exists and operates in continuous time), in practice due to tractability issues, most calculations are performed in discrete time. The resolution required depends on the nature of the network and the type of analysis required.

Key abstractions

A credit network framework has the following core components:

A discrete temporal grid where future states of the balance sheets / credit asset portfolios are modelled